Slowdown or not, we are aggressive on US: Rajesh Gopinathan, CEO, TCS

TCS will continue to invest aggressively to win deals as it looks to end FY19 with double-digit growth.

TATA Consultancy Services will continue to invest aggressively to win deals as it looks to end FY19 with double-digit growth.
CEO Rajesh Gopinathan told ET that the company has the operational discipline to deal with a slowdown but is still focused on winning the US market.
Edited excerpts:

You’ve talked about moving aggressively to win deals. Is this pricing aggression or are there other ways in which you will go after demand?The decision to hire locally and fulfil that demand is part of it. It is not pricing aggression, it is fulfilment aggression. It is saying even if I don’t have the capacity in my current cost structure, I will get the capacity to catch that demand and optimise the cost at a later time. Investments, participation in early-stage opportunities which might be entirely onsite-centric because it is still exploratory in nature or we think the client will take time to move to a more structured model, but the opportunity is large enough to justify getting in there. It might involve people take-over. Our view is over a period of time, we will be able to bring these into rational structures.

Are you seeing any signs of a slowdown and potential recession?The slowdown talk has picked up steam in the last month or so. In many ways, it is coming from the financial markets. It is more a reflection on the credit cycle and the financial markets where the commentary has started and then, the anticipation of a trade war. The impact of the trade war is yet to be seen and the financial markets have for some time been decoupled from the real economy. When the markets were doing very well, the economy was not necessarily matching with it. The financial markets are reacting a lot more to the money supply scenario than the underlying economy. So I want to be cautious about not talking ourselves into a situation. We will deal with it as it unfolds.

We are in a quarter where client IT budgets get firmed up. Are you seeing any sign from clients about a pullback in spending?We had our big customer meeting in September. As we went into the end of the year, the dialogue was very strong and both the deal closure and pipeline were strong.

We See Demand and are Gearing Up for It, Says TCS CEOIt’s only now, post the holiday, and they come back in the New Year and we start engaging with them, we will get a sense of where they are. Negative chatter is never good because it creates doubt in everyone’s mind. But rather than microanalyse it, we are focused on capturing opportunity where we see it. It played out in Europe, where rather than back out during the slowdown, we over-invested and now that is paying dividends.

As you wait to get a sense of where client spending will be, has TCS put in any contingency plans to deal with a spending freeze?Not really. The risk in all of this is that you get too overawed by the macro and then that negativity translates to your sales team. It is better to stay focused. We see demand and we are gearing up for that demand and participating. The discipline area is to run a high utilisation so that you are not carrying a bench. So if you are on a high utilisation when it dilutes, it’s fine. Then it is just a matter of carrying the bench a bit more and then tweaking the hiring for the future. So you have a time-bound problem and not a compounded problem. Other than that, for the macro part of it, we are not really positioning ourselves.

You have said TCS is betting on superior execution to return margins to the targeted band. Could you explain what exactly gives you the confidence that your execution is superior?All elements of it. It is about project structuring. The idea is appropriate project structuring, identifying how to break down the task, what is the supportive quality management, what are the process frameworks you can leverage. We have our own process management tool that has integrated quality management and project management.

So then other elements like keeping attrition low — that also keeps execution high because if you have a lot of churn in the team, that itself has a cost element — all of these are operational elements. From the intellectual asset perspective, it is solution accelerators, frameworks, knowledge management systems, an integrated service management system so they can seamlessly access people with different skill sets, a good training system… Then we have a delivery execution group — they provide oversight and intervention as required. There are a combination of process, tools, intellectual assets and organisation structure — all of these allow for superior execution.